Credit Risk

Each user is subject to credit risks in the context of:
  • Eligible Collateral: This relates to an underlying asset's credit exposure, for example tokenized US Treasury collateral, in the event that the US Treasury defaults on its obligations.
    • Where assets carry credit risk beyond what might typically be deemed 'sovereign' or 'blockchain' risk, this credit risk may be either partially or fully hedged, with Infinity buying protection, via a credit default swap (CDS), to isolate the impact from a risk of default. Premiums charged on the CDS would be passed-through / deducted from your Trading Account.
  • Infinity Credit Risk: while all efforts have been deployed to provide a robust margining system and efficient liquidation engine, you are, to an extent, exposed to Infinity's credit risk.
    • Note however, that collateral assets are held on-chain in smart contracts providing the transparency DeFi users have become accustomed to and expect.
In respect of the above, the initial methods to mitigate these credit risks include:
  • Infinity Insurance Fund: the Insurance Fund (denoted, "iFund") is established by a combination of PnL contribution and partial or full net balances resulting from the liqPenaltyFee. iFund is applied to aggress any shortfall on portfolio liquidations.
  • Protocol Health Metrics: under "Explorer" on Infinity's website, the aggregate health score and risk sensitivity to token price and rate movements demonstrates the Infinity protocol's exposure (e.g. concentration) by token and external external counterparty.
  • Central Clearing Counterparty (in future): partner with a CCP that takes on the counterparty credit risk between all users within Infinity, thereby streamlining transactions, increasing capital efficiencies and reducing risk for all users.